Optiplex GX280 cannot boot

I have a problem with an Optiplex GX280 system, it cannot seem to boot correctly so I can install Win XP.

In the BIOS menu, it recognizes my external USB DVD drive (the internal is broken), but when the boot order is arranged so it can load from it first, it bypasses it completely (the dvdrom drive and disk are tested and they work).

I tried to boot from usb flash disk (with many possible configurations), the system sees it, starts to install windows and then it either freezes at "setup is starting windows" or it shows a blue screen either blaming the disk or the memories. I run tests on both and they seem to be fine. The disk (SATA) has been formatted and I don't have any access to the previous OS.

I read somewhere that there might be a problem with the sata drivers of the hard disk. I found one version from dell's support center, extracted it to a floppy disk, but the win xp installation does not recognize them as suitable.

Any ideas on how to overcome these issues? If there are other relevant details that I omissed please let me know.